In a statement titled “US Foreign Aid Halt: Impact on Zimbabwe’s Economy,” FBC Securities Pvt Ltd noted that the aid freeze exacerbates liquidity constraints, foreign currency shortages, and inflationary pressures.

Foreign aid has historically been important to Zimbabwe, supporting healthcare, food security, infrastructure, and social programmes.

Now, with reduced donor inflows, the banking sector, stock markets, and formal businesses may struggle to maintain stability. The statement reads:

To mitigate these challenges, the Zimbabwean Government must take decisive action by strengthening domestic revenue mobilisation, restoring investor confidence, restructuring state-owned enterprises (SOEs) and improving governance and fiscal discipline,.

Pursuing debt resolution efforts with multilateral institutions, diversifying export earnings and fostering a stable macroeconomic environment will be crucial for weathering the impact of declining external support and ensuring long-term economic resilience.

FBC Securities suggested that Zimbabwe could seek alternative funding from other international donors, regional partners, and non-traditional allies such as the African Union, Southern African Development Community (SADC), and countries in the global south for financial and technical assistance.

The organisation noted that donor-funded projects and direct humanitarian assistance contribute to local foreign currency liquidity circulation, with NGOs and humanitarian organisations distributing US dollar payments to local suppliers, employees, and contractors.

FBC Securities revealed that NGOs contributed 10 per cent and 9 per cent of total foreign currency receipts into Zimbabwe from January to September 2023 and January to September 2024, respectively.

The organisation warned that the reduction in these cash inflows would result in less disposable income, affecting consumer spending, particularly in rural and vulnerable communities. FBC Securities said:

The freeze will also exacerbate foreign currency shortages in the economy, making it harder to finance imports and working capital requirements of private sector businesses.

FBC Securities highlighted several impacts, including reduced deposits in Foreign Currency Accounts (FCAs), decreased foreign currency inflows, lowered stock market liquidity, and increased volatility in blue-chip stocks.